Just in Time: A Breakthrough in ‘Rent-to-Own’ for Those Who Can’t Buy Now

Real_Estate_Today_byline      It’s not uncommon for us to get a phone call or drop-in from someone who would like to buy but who might not be in a position do so at this time. They are looking for a rental, and for that we refer them to trusted companies that specialize in rentals. Sometimes the caller or visitor will inquire about rent-to-own, but we explain that it is nearly impossible to find a seller in this market who would consider rent-to-own when they can sell now for top dollar.

I’m happy to announce a breakthrough. Last week our office was presented with a new business model that could fill this gap in the real estate market. The way it works is this: we submit the prospect’s name to a company which, upon approving the person as a tenant, agrees to purchase a house, which that pre-approved tenant can rent.

Once approved, the prospect goes on the company’s website which contains all the MLS listings (sub-ject to company approval) that qualify for this program. The homes can range in price from $100,000 to $550,000. Only townhomes and single family homes qualify for this program — condos do not.

If you’ve looked online for rentals, you are familiar with the limited inventory of rental homes.

The fact that the sellers and listing agents of the qualified MLS listings are offering their homes for sale, not for rent, doesn’t matter. If a prospective tenant finds a for-sale home they’d like to rent, our partner company can offer a lease for that home which states what the rent will be for the next five years, and which also provides a pre-determined purchase price for that home over the same 5-year period.

Let’s say you find a $500,000 home you’d like to rent.  If you click on that listing, you’ll find the following grid of rental and purchase prices:

Rent_to_own_grid As you might expect, these figures are subject to adjustment, since (1) the listed price may not be the final sale price, (2) the home may need renovation work, and (3) there may be other costs associated with purchasing and owning the property. These and other conditions are spelled out in the lease agreement that is signed by the prospective tenant.

At that point, we represent the rent-to-own company in negotiating a purchase of the identified property. To the seller and to us as a buyer’s agent, it’s an ordinary transaction by an investor.   In this case, however, the investor has already identified a qualified tenant for the property.

Although the landlord is bound by the specified rents and purchase prices for five years, the tenant is only locked into a one-year renewable lease and can choose to purchase the home at any time.  They can also choose to not renew the lease and simply walk away.

This flexibility will be particularly attractive, I expect, to people relocating to our area who may be able to buy immediately, but don’t want to lock themselves into purchasing the first home they find. They can rent a home they think they might want to buy, then buy another house after the first 1-year lease period is up.  They can also opt to exercise their option to buy the house for a pre-determined price — an increase over what their landlord paid for it.

Home_Partners_screen_shot  At right is how an MLS listing appears when displayed on the company’s website, showing the listing price on the right and the estimated initial rent on the left.

Although the prospective tenant is not our client — the landlord is — we set up showings for that tenant just like we would for any buyer. When the tenant identifies the home they’re interested in, we tell the company and together we go about buying the property so that tenant can rent it.

If you or someone you know can’t (or doesn’t want to) buy at this time, have them call any Golden Real Estate agent at 303-302-3636 or send an email to info@GoldenRealEstate.com.

 

What Is an ‘Escalation Clause’ and How Should Sellers Respond to One?

In our competitive seller’s market where a listing might attract five, ten or more competing offers, submitted contracts often include something called an “escalation clause.”

An escalation clause is an additional provision worded something like this: “In the event Seller receives a competing contract with a purchase price, net of concessions, in excess of the Purchase Price in this Contract, Buyer agrees to increase the Purchase Price of this Contract to $1,000 in excess of the purchase price of said competing contract, up to a maximum of $______.” I have seen contracts offering as much as $5,000 over a competing contract.

Two things you need to know about this strategy. Most importantly, the seller is completely free to ignore the escalation clause and does not even have to accept the best offer. Secondly, when it’s you submitting the contract with an escalation clause, I recommend not inserting a maximum price. That makes it more likely you’ll receive a call from the seller’s agent telling you what that higher offer is.

 

Black Hawk Mountain Home Just Listed by Chuck Brown

199 Lake Front Dr.jpgReady to leave the city and move to the mountains? Be sure take a look at this 2,200-sq.-ft. 3-bedroom, 3-bathroom ranch-style home at 199 Lake Front Dr. in Black Hawk. This home is about 3.5 miles north of the casinos and within walking distance of Gilpin’s K-12 public school, with quick access to Hwy 119. This home features 1-level open concept living space with spectacular southeastern views of the foothills and snow-capped peaks. Beneath the living area is an oversized 2-car attached garage, laundry room and storage room. Enjoy the wonderful Gilpin County services, low property taxes (only $487 in 2017) and mountain lifestyle. You can see more photos and take a narrated video tour of this home at www.BlackHawkHome.info. There will be an open house on Saturday April 28th, 11am to 1pm.  Call your agent or Chuck Brown at 303-885-7855 for a private showing. Listed at $385,000.

 

As Earth Day Approaches, Coloradans Have Many Opportunities to Do Their Part

Real_Estate_Today_bylineThis Sunday, April 22nd, is the 48th anniversary of Earth Day. Here are some of the ways you can participate in this annual event and do your part in preserving this planet for future generations.

On Saturday, April 21st, from 11 am to 4 pm, Lakewood will hold its Earth Day Celebration at the Lakewood Heritage Center, south of Belmar on the west side of Wadsworth. A no-charge bicycle valet will be on hand so your bike will be secure while you listen to live music (three different bands will play), do yoga, attend a compost workshop, learn how to create a sustainable backyard, or visit the electric vehicle expo, where a Nissan Leaf, Chevy Volt and my own Tesla Model X will be on display.  I, along with other EV owners, will be there to answer questions and demonstrate each car’s features.  See a full list of Lakewood’s Earth Day activities (far more than other cities, I’ve found) at www.Lakewood.org/earthday.

Recycling is a popular Earth Day activity, particularly the recycling of electronic waste. Adjacent to their Earth Day event, at 777 S. Yarrow Street, Lakewood is accepting e-waste, but for a fee.  Meanwhile, the Denver Metro Association of Realtors will accept e-waste free of charge at its Jeffco office, located at 950 Wadsworth Blvd. from 8am to noon that same morning. You can drop off unused, unwanted and nonfunctional electronics. This is a great way to responsibly recycle nearly anything with a plug or battery!  Recycling is open to the public and is free, with the exception of televisions and monitors, which carry a fee of $20 to $60 depending on size. There’s also a $5 charge if you ask to have hard drive data destroyed.

Residents of the City of Golden can recycle e-waste and many other items during its “Community Pride Days,” which is the weekend of May 19-20.  The city doesn’t charge for this service, although proof of city residency is required. A Golden mailing address does not by itself make you a City of Golden resident.

Year-round you can bring block white Styrofoam to Golden Real Estate’s “Styrofoam Corral” behind our office at 17695 S. Golden Road.  At least once a month, the 10’x20’ corral fills up and we truck it all to one of three recycling/reprocessing facilities, but ours is the only location in Jefferson County for dropping off this material.  We estimate that we keep over 200 cubic yards of polystyrene (the generic name for Styrofoam) out of the landfills every year.

Other recycling:

  • You can bring up to 5 gallons of used paint to many Ace Hardware, Guiry’s and Sherwin Williams stores. See www.paintcare.org for locations.
  • Donate your unwanted bicycles to the Golden Optimists any Tuesday or Thursday from 1 to 5 pm, at 1200 Johnson Road (next to the Golden main post office).
  • Take old clothes hangers to any dry cleaning store.
  • Home Depot accepts unbroken CFL light bulbs for recycling.
  • Any Staples or Office Depot store will accept used toner or ink cartridges and give you a credit if you are a rewards member.
  • King Soopers and Safeway accept plastic shopping bags for recycling.
  • O’Reilly’s accepts used motor oil.

Do You Have a Question or Concern About Your Reverse Mortgage?

A very upset reader recently contacted me with a concern about their reverse mortgage and the payment of real estate taxes. I referred that reader to Jim Spray, a reverse mortgage expert. If you have a similar concern, call Jim at 303-403-8168 or write to him at Jim@JimSpray.com. Please copy me on your email.

I love to hear from my readers for any reason. Call me at 303-525-1851 or email me at Jim@GoldenRealEstate.com. Call or email me anytime!

 

Would You Like to Be Alerted to Real Estate Activity in Your Area?

Would you like to know when homes in your subdivision go on the market, go under contract or are sold?

As a free service to our readers, we can set you up to receive an email alert within 15 minutes of any of those real estate events occurring in your neighborhood.

To get it started, all you need to do is send an email to info@GoldenRealEstate.com,. Provide your own address and the outlines of your neighborhood or the name of your subdivision, and we’ll get you set up.